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Politics test Silicon Valley's Russian ties

SAN MATEO, Calif. (AP) - Entrepreneurs and investors say Silicon Valley's fast-growing financial ties with Russia's tech sector are being slowed down by current political tensions between the White House and the Kremlin.

"It's safe to say a lot of investors here are taking a step back to see how the situation will unfold," said Alexandra Johnson, who manages a $100 million venture fund called DFJ VTP Aurora, a Menlo Park, Calif., branch of Russian bank VTB.

For decades, Russia's sophisticated scientists and engineers remained at arm's length from Silicon Valley's venture capitalists and marketing mavens. That changed in recent years with a flurry of investment, largely sparked in 2010 when then-Russian President Dmitry Medvedev visited the region and met with high-tech leaders.

Russians investors, including billionaire Yuri Milner, who has large stakes in Facebook and Twitter, poured an estimated $2 billion into U.S. tech firms over the past three years, according to Johnson, who organized a technology symposium with venture capitalists and entrepreneurs last month in San Mateo, south of San Francisco.

But Silicon Valley entrepreneurs and investors fear negative economic fallout from Russia's takeover of Crimea, its troop buildup near Ukraine's border and its attempts to compel constitutional changes in that country, markedly raising political tensions with the West.

Secretary of State John Kerry has charged Russia with "creating a climate of fear and intimidation" and the Obama administration has frozen assets and revoked visas of some Russian officials and their associates.

Among the concerns in this technology center are whether visa limits will make it hard for business travel or for scientists to relocate. In addition, economic sanctions could tighten the flow of dollars between tech sectors in both countries. And for those U.S. and Russian firms with ties to Ukraine, rumors of a draft are fanning fears that young entrepreneurs and engineers will have to close up shop and fight.

Experts say an investment slowdown will be temporary and will not untrack rapidly growing, lucrative U.S.- Russia business relationships in the long run.

Axel Tillmann, who invests Russian venture capital on behalf of government-sponsored RVC-USA, said the tensions are definitely going to "slow things down for a while," describing a two- to three-month suspension of additional investment by Russian government funds in tech firms.

However, Tillmann said the flow of investments is certain to resume because Russian companies thrive on Silicon Valley's entrepreneurship.

"Russian technologists have been at the leading forefront of technology for many years, even going back to the Soviet Union, but they had the problem they called 'The lonely ideas,'" he said. "The ideas just sat there."

Tillmann said the one thing Russian companies are not very good at today is commercializing their technology - something that Silicon Valley firms are masters at doing. "When we combine, we get the best of both," he said.

In Russia, entrepreneurs and investors now tap Silicon Valley experts to try to replicate their success.

A planned technology hub outside Moscow, the Skolkovo Innovation Center, includes Google executive chairman Eric Schmidt, Cisco CEO John Chambers and retired Intel CEO Craig Barrett on its 17-member board.

Russian entrepreneurs have also launched their own firms in the Silicon Valley, and tech giants are buying stakes in Russian startups. Last year, for example, Cisco acquired a stake in Russian software developer Parallels and got a seat on its board.

The Russian Innovation Center, which opened two years ago on Silicon Valley's Sand Hill Road amid a cluster of venture capital firms, combines three firms investing in California companies committed to the Russian market.

And today more than 100 Russian high-tech firms have representative offices in the northern California region, including Russian search engine Yandex, which employs former Yahoo and Google engineers at its Palo Alto laboratory.

On April 3, San Jose-based Cisco, a valley leader in building ties to Russia, announced that it had won a contract to supply the video conferencing network for Moscow's water and sanitation supplier. Cisco has also reported that it is currently reviewing its Russian business practices for any possibility of corruption.

Spokesman John Earnhardt said they are watching events closely, but that Russia remains an important market.

Silicon Valley-based Dmitry Akhanov, president of the U.S. subsidiary of Russia's state-owned venture fund RUSNANO, said it has taken years to shape those East-West tech sector relationships.

"Political turmoil can happen, but business ties are much more sustainable because those are people-to-people, and those build trust," he said. "The diplomats need to calm down and think about the immediate consequences of their decisions. It's very easy to hurt an economy and much harder to rebuild."

Oleg Slepov, who heads the Russian Trade Representation's office in San Francisco, said he's spoken with many U.S. business leaders lately who tell him they have no plans to close or scale down their business in Russia.

Slepov said he's even optimistic that business ties may help ease the conflict.

"The interests of Russian and American companies are so intertwined today that, on itself, it becomes a factor that is contributing to easing of tensions between Russia and the U.S.," he said.


Follow Martha Mendoza at https://twitter.com/mendozamartha

Join the discussion

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California Granny April 13 2014 at 7:58 PM

What better way to get control of any given country is by infiltrating the country, it's system and walaa, you are into inner workings of that region- country, and now you can start yelling you want your rights or else Putin will sick his troops after you. Isn't he (Putin ) not doing the same thing in Crimea and Ukraina.

By the way, I have seen that very same thing done in my country Finland, during the cold war. Russkies are very clever when it comes to any new technicalities, where they plant their spies, un-noticed of course, to gain info on any given matter, and then claim, they invented it.

Oh yes, another words Russkies are getting new knowledge by skimming others ideas. One good example is the space race. They imported western scientists to Russia to give Russkies upper hand in space race in the 50's. All a true facts. Check the history.

Now they import their OLEGARCHDS here, to learn our finances that they can use against us later on. Typical. Russians suck the info for their betterment and claiming they invented it all, you just watch and see. As Putins needs all the help he can get from his spies.

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1 reply
rademps California Granny April 13 2014 at 11:39 PM

"One good example is the space race. They imported western scientists to Russia to give Russkies upper hand in space race in the 50's."

That's an oversimplification, but largely true. Werhner von Braun is an example of one who was brought to the USA instead of the USSR. The ones who went to Russia were called the vanishing paperclips, as they were called. German scientists and aircraft/rocket experts captured at the end of WWII and whisked off to Russia. The Germans had a Heinkel jet (HE 162) that the Russians modeled their MIG15 after and we had the Sabre jet, based on the same German plans. Both planes fought in Korea in the early 1950's, one for the North and one for the South. Take a look on Google: MIG15 Sabre Jet

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lhughes422 April 13 2014 at 8:47 PM

And the US Government is talking about giving up the Internet Control?

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1 reply
Nevada Woman lhughes422 April 14 2014 at 1:58 AM

I think a bunch of the websites consist of scammers and liars anyway. Does it even matter? In what way does the US have control? I am not sure how all of that works. Why is the US giving up control?

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eeodjo April 13 2014 at 2:31 PM

We could have a case here called, SORRY COMRADE, NOTHING PERSONAL. IT IS STRICTLY BUSINESS. From Russia With Love!!!

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RoyROZI April 13 2014 at 2:22 PM

you know that Putin was big mistake too fast invasion to cermia. WHY he did not had meeting at UN first place? you know USA tried to help Russian improve their tech for many years. Today I feel not trust Russians cultures look alike back to Commusit Soviet again because i always like Russian because I married russian.

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welcom szepi April 13 2014 at 7:35 PM

Keep those bams out of usa.

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Ed Perkins April 13 2014 at 1:21 PM

Political sanctions unnecessary. The reluctance of the West's private sector to go forward should have the desired negative effect. The Russian economy will take trementous hit if isolated from the private sector world.

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1 reply
goodgrief61945 Ed Perkins April 13 2014 at 2:23 PM

The private sector won't do anything. Money overrides everything.

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William April 13 2014 at 7:48 PM

They already have stolen much of our technology. Why stay and loose money.

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gudtip April 13 2014 at 1:46 PM

shut down anything and everything with Russia

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phoenix44al April 13 2014 at 5:42 PM

We don't need their stinking Rubles which have no value in the world market. We must make Putin suffer and show that he cannot get his way with the way he treats his neighbors.

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HENRY April 13 2014 at 5:37 PM

Russians come here because it as safe as it get to invest. Take their dirty money and invest in China it is called coma.

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